With this in mind, I note Virgin Galactic (NYSE: SPCE) stock has been surging higher. It has gone from $2.37 (or about £1.76) in April to just under $4 today. That’s a 65% jump!

In the US, a business trading for a couple of dollars with a $98m market cap — like Virgin Galactic in April — would be classed as a penny share. But it hasn’t always been this way. Back in 2021, the space tourism company commanded a market cap above $10bn.

This means the stock has lost 99% of its valuation in just four years!

I think it’s worth asking why Virgin Galactic has marched higher recently, and whether its recovery might just be getting started.

Bold vision

Virgin Galactic has an ambitious mission to ferry thousands of paying customers to the edge of space.

It aims to do this by tethering a rocket to a mothership, which takes off just like any other plane. Once it’s high enough, the rocket is released and blasts off to space. After a few minutes of sightseeing and weightlessness, the tourists glide back down to earth.

Virgin Galactic has already successfully completed a few trips. In Q1 though, the firm reported revenue of just $500,000, compared to $2m the year before. And it made a net loss of $84m.

Analysts expect almost no revenue this year, as the company’s operations are on hold while it builds a new class of spaceship. Next summer, it plans to carry a research payload, before resuming commercial spaceflights in the autumn.

In January, it expects to re-start sales for paying customers. With tickets priced at approximately $600,000 per seat, the firm’s revenue could quickly jump higher.

Burning cash

Is the stock worth considering then? Unfortunately, it’s just far too speculative for me.

Virgin Galactic had $567m on the balance sheet at the end of March. At the current cash burn rate, it’ll be touch and go if it makes it to commercial lift-off, especially if there are manufacturing problems or delays with the new spaceship.

Of course, this isn’t to say the stock won’t go higher. There’s a lot of meme stock-type speculation around right now, so anything’s possible.

Another space-related stock

For investors wanting exposure to the growing global space economy, Filtronic (LSE: FTC) might be worth considering instead.

This is a small-cap UK firm that designs and makes amplifiers, transceivers, and filters for various markets, including telecommunications, aerospace, and defence.

The share price is up 100% year to date, driven by excitement around a game-changing contract it has in place with SpaceX. This is to supply amplifiers for its massive Starlink satellite network.

Investors should be aware that there’s customer concentration risk here, given the importance of SpaceX to the firm’s growth. So it was encouraging to see Filtronic recently bag a £13.4m contract to supply high-performance modules to a different customer (in the aerospace and defence sector).

The stock isn’t cheap at 33 times earnings. But looking ahead, Filtronic looks set to benefit further from Starlink’s strong growth and higher European defence spending.

The post Up 65% since April, is this ex-penny share ready to rocket higher? appeared first on The Twelfth Magpie.

Since those heady days in the summer of 2021 though, the share price has come back down to Earth with an almighty bump. It’s now 99.8% lower, wiping out around $13bn of market value in the process!

Singing among the stars

On 14 April, the first all-female group in more than 60 years went into space. The star-studded sextet included pop singer Katy Perry and Lauren Sanchez, the fiancée of Amazon founder Jeff Bezos. Perry became the first artist to sing in space.

Virgin Galactic has a backlog of over 700 paying customers, including a few celebrities. So why did these six get chosen by the space tourism pioneer? Well, it wasn’t actually Virgin Galactic that took them on the voyage at all. It was Blue Origin, the rocket and space exploration company founded by Bezos.

Indeed, Virgin Galactic hasn’t flown at all since last summer. It has paused operations to build a new fleet of spacecrafts (called Delta) that will carry six passengers rather than four. The new Delta class will also be able to fly twice weekly rather than once a month.

However, the next flight isn’t expected until summer 2026, with astronaut trips planned a few months after that.

Unique experience

Frustratingly, I have a mate who’s a flat-Earth theorist. I’d love to pay for him to go on one of these suborbital spaceflights so he can see the curve of the Earth with his own eyes. Every space tourist who’s been on one says it’s a truly unique and powerful experience.

Founded two decades ago by Sir Richard Branson, Virgin Galactic has a few successful flights under its belt. So we know its technology works and is capable of delivering a few minutes of weightlessness and a view of Earth for paying customers. Unfortunately though, each trip costs around $600,000 (£454,000) a customer, so me and my friend will go on debating for now.

Should I invest in Virgin Galactic?

The company essentially has no revenue coming in over the next 12-18 months. So the question is how much cash is on the balance sheet and whether that’s enough?

At the end of 2024, the firm had $657m in cash and equivalents. The net cash used for operating activities last year totalled $353m. However, I would assume that the cash burn will increase as it ramps up production of the new Delta class, which started being assembled last month. Therefore, it’ll be nip and tuck by the time next summer’s finished.

Further shareholder dilution seems certain. But with the share price so low, that might not be enough. The company also carries around $420m in convertible debt, set to mature in early 2027.

Global supply chain problems must also be a headache as it enters production. Finally, the recent celebrity voyage highlights how formidable the competition is, from both Blue Origin and Elon Musk’s SpaceX.

Weighing things up, the stock’s far too risky for me.

The post Katy Perry goes into space! Should I buy this space tourism penny stock at $2? appeared first on The Twelfth Magpie.

Beleaguered luxury brand

The first stock’s Mulberry Group (LSE: MUL). Shares of the luxury accessories maker have fallen 76% in just under four years!

This has seen the company’s market-cap slump to just £63m. Part of me thinks that’s too low for a company that posted £153m in FY24 sales (which ended in March). On the other hand, Mulberry’s being hammered by the global slowdown in demand for luxury goods.

In November, the company reported that revenue dropped 19% to £69.7m in the six months to the end of September. Sales fell in every region, with particular weakness in Asia. Gross margin contracted to 66.5% from 70.4% and the loss widened by 23% to £15.7m. Grim stuff.

The company doesn’t see things picking up anytime soon, saying the “wider macro-economic environment, including ongoing inflationary pressures, continues to present uncertainty and challenges“.

Now, Mulberry’s the UK’s largest designer and manufacturer of luxury leather goods. I don’t like to see the British brand suffering like this. So I hope new CEO Andrea Baldo is successful in cutting costs, renewing the brand, and restoring profits.

Perhaps he’ll succeed, or maybe the firm will be acquired at a higher price (though it rejected two bids from Frasers Group last year). Truth is, I haven’t the foggiest what’s going to happen. With the firm posting losses, there’s just far too much uncertainty for me to invest here.

Not ready for lift-off

The next penny stock I’m not touching with a bargepole in February is Virgin Galactic (NYSE: SPCE). This is the space tourism business founded by Sir Richard Branson.

The share price has suffered a supernova collapse, plummeting 99.5% in four years!

The company’s listed in the US, where there’s a slightly different definition of a penny stock. It’s typically defined as one that trades for less than $5 and has a low market-cap. That certainly describes Virgin Galactic, with its share price at $4.50 and a meagre $130m market cap.

What’s gone wrong? Well, the company conducted its final spaceflight last summer before announcing a two-year pause in commercial operations to focus on building its next-generation spacecraft. So there’s almost zero revenue coming in until at least 2026.

In Q3, it burnt through $118m of cash, leaving $744m in cash and equivalents. While that sounds a lot, cash burn’s expected to have risen to between $115m and $125m in Q4. At that rate, it probably won’t have enough to fund itself through to mid-2026.

The solution? Keep selling more stock, massively diluting shareholders in the process. This isn’t new, as the share count history shows.

Now, I do support Virgin Galactic’s mission to fly thousands of private astronauts to space. Seeing our planet from above famously changes perspectives in a profound way (known as the ‘Overview Effect’). If space travel can bring humanity together, then I’m all for that (its retired spacecraft was called ‘VSS Unity’ for this reason).

However, I doubt such idealism will do much for my portfolio down here on Earth. So I’m sitting this one out.

The post 2 penny stocks I’m avoiding like the plague in February appeared first on The Twelfth Magpie.

Is this a golden opportunity for me to snap up some shares on the cheap? Let’s find out.

Another mission completed

Founded in 2004 by Sir Richard Branson, Virgin Galactic aims to usher in an era of commercial space exploration by regularly taking customers to the edge of space.

On 8 June, the firm successfully completed its 12th mission and seventh commercial spaceflight. It carried three private astronauts and a researcher who carried out various experiments, including whether insulin pens can administer accurate insulin doses in microgravity.

After years of setbacks, the company has settled into a steady cadence of successful flights, moving closer to its founding mission.

However, in the words of Porky Pig at the end of the Looney Tunes cartoons, “That’s all, folks!” Well, at least for now. That’s because this was Virgin Galactic’s last spaceflight before it pauses commercial operations for two years to upgrade its fleet to next-generation Delta Class spaceships.

Cash concerns

That’s right, the firm will be generating essentially zero revenue for at least the next 18-24 months. Yikes!

The immediate thing to consider here then is whether the company has enough cash to see it through this period. At the end of Q1 (31 March), it had cash and marketable securities of $867m. However, it only generated £2m in quarterly revenue while burning through $126m in cash.

A slightly lower rate of burn is expected in Q2 ($110m-$120m). Even if we assume that falls by a few million per quarter during the hiatus, it looks nip and tuck on whether that cash will survive eight quarters.

Remember, the company is building two new ships from scratch and they’ll cost approximately $40m-$50m each. Then there’ll be all the necessary flight tests before commercial operations restart.

Unfortunately, with the stock trading so low, the option of raising the necessary cash by selling more shares doesn’t look viable. It might have to strike up partnerships or reach out to a mercy investor.

Should I get on board?

Assuming Virgin Galactic gets through the forthcoming period though, the unit economics of the new spacecraft look very attractive (in theory).

The two ships will carry six passengers each at a cost of $600,000 per passenger, translating into revenue of $3.6m per flight. And the firm is aiming for 125 of these trips for a total of $450m in annual revenue, with a contribution margin of at least 75%.

However, one problem here is that the company still has a backlog of around 800 passengers to get through. And they’ve either paid $250,000 or $450,000.

Therefore, even if the firm executes perfectly with no delays, it’ll presumably be well into 2027 before the $600,000 prices kick in.

Will the ongoing losses engulf the firm before it ever reaches profitability? It’s a massive risk, and one which seems largely responsible for the stock’s collapse.

Moreover, rival Blue Origin has just restarted spaceflights with six paying customers on board. Backed by multibillionaire Jeff Bezos, it has few cash concerns.

I love Virgin Galactic’s ambition. But given the enormous uncertainty here, I’d rather invest elsewhere.

The post Should I buy penny stock Virgin Galactic at 67p? appeared first on The Twelfth Magpie.

After plummeting 95% in three years, Virgin Galactic (NYSE: SPCE) shares now cost just $0.88 (70p) each. This means the firm’s market-cap has collapsed to just $361m, down from $12bn at the height of the meme stock mania in 2021.

Given that a company must have a market-cap of at least $14.5bn or so to be included in the S&P 500, I think we can agree that $361m is low across the pond.

Billionaire Richard Branson founded space tourism company Virgin Galactic in 2014. It aims to regularly take paying customers to the edge of space aboard its rocket-powered spaceplanes.

Now, Branson ruled out putting any more money into the firm in December 2023. However, at the time, his Virgin Group still owned about 7.7% of the enterprise through its Virgin Investments arm.

Is the stock worth me investing in now after its almighty fall? Let’s explore.

Hibernation mode

The good news is that the firm has successfully completed 12 spaceflights so far. The flight window for the seventh commercial operation (‘Galactic 07’) opens on 8 June. This will carry four private astronauts, including a Axiom Space-affiliated researcher who will conduct multiple scientific experiments in suborbital space.

However, things then get a bit strange because that will largely be it for two years. Its main VSS Unity spacecraft will be retired. The firm will preserve what cash it has left to focus on building its next-generation Delta spaceships, which it says are on track for commercial service in 2026.

Delta class is designed to carry up to six passengers (rather than four), increasing the number of paying customers per flight. The firm also expects it to fly more frequently.

Heavy cash burn

Turning to the financials, we can see why this is happening. Last year, Virgin Galactic generated revenue of $7m, up from $2m the previous year. However, its net loss was $502m, and $500m in 2022.

It finished 2023 with $982m in cash and equivalents. But it’ll need most of that (if not more) to fund the Delta spacecraft R&D and rollout. Hence the cash-preserving hibernation mode.

Share dilution’s already been very heavy with the company raising $484m last year issuing 122.8m shares.

It’ll probably need more cash, suggesting further shareholder dilution. You don’t need an A-level in maths to see this is a sticky situation.

Would I buy the stock?

My worry here is that the new Arizona factory to make Delta spaceships isn’t even due to open until mid-2024. Then the spacecraft will have to be built before numerous safety checks and test flights take place.

Only then, assuming everything goes swimmingly, will customers be heading into space again.

I’m skeptical all that can be done in the next 24 months. Moreover, that’s around eight quarters, which is an eternity for a public company with almost zero revenue coming in.

In the absence of commercial catalysts, I imagine the stock will only drift sideways (at best) during this time. The worst case scenario is the company runs out of cash.

Given this, I’ll be investing my money in other less risky stocks.

The post Billionaire Richard Branson is invested in this 70p penny stock. Should I buy it? appeared first on The Twelfth Magpie.

Yet this would still leave the stock down around 89% in a little under two years.

So, is now the time for investors to get on board? Let’s explore.

All systems go

To recap, Virgin Galactic was founded by British businessman Richard Branson in 2004. Its aim is to commercialise sub-orbital trips to space, which finally looks to be happening.

The company announced that its first commercial space flight, Galactic 01, is planned to fly between June 27 and 30 June. The second, Galactic 02, will follow in early August, with monthly trips expected thereafter.

Galactic 01 is a scientific research mission, which will carry three crew members from the Italian Air Force and the National Research Council of Italy to conduct microgravity research.

Despite this exciting development, the firm’s current revenue is negligible compared to its $1.5bn market cap.

A risky stock

I should disclose that I was once a Virgin Galactic shareholder, but I sold the stock when it skyrocketed above $50 during the meme stock craze of 2021.

If I were to invest again, I’d need to be mindful of the risks here. The first is that after nearly 20 years of test flights, the company is only just launching actual commercial operations. It has a long history of delays and technical problems.

Plus, there was a fatal accident in 2014 that claimed the life of a Virgin Galactic test pilot in the Mojave Desert. It was found that this crash was caused by a co-pilot error.

Even though the company learnt from this tragedy and built in safety features to prevent it happening again, risk remains.

Competition

The company also faces formidable competition in the shape of SpaceX and Blue Origin. These are the space exploration companies set up by Elon Musk and Jeff Bezos, respectively.

In 2021, Star Trek actor William Shatner completed a sub-orbital flight with Jeff Bezos aboard Blue Origin’s capsule. Like Branson, both Musk and Bezos are visionary entrepreneurs, but they have vast ambitions stretching well beyond such sub-orbital flights.

SpaceX, for example, has already chartered its first private astronaut flight to the International Space Station (ISS). At $55m per person for the rocket ride and accommodation, with meals included, the ISS is the solar system’s most expensive tourist destination.

That makes Virgin Galactic’s $450,000 per seat for five minutes of weightlessness in space look like a bargain!

My move now

Celebrities including Justin Bieber, Leonardo DiCaprio, Tom Hanks, Lady Gaga, Angelina Jolie, and even Elon Musk have all reportedly bought tickets. They could bring a lot of attention to Virgin Galactic and the stock.

I reserve a small part of my portfolio for speculative holdings, and I’d definitely place this in that category. I’m contemplating buying a few shares again, now that commercial space flights are due for lift-off.

But this remains a high-risk stock, so I’ll certainly be keeping my position small.

The post Should I buy Virgin Galactic stock as it rockets above $5? appeared first on The Twelfth Magpie.

Things were looking good

I last wrote about the company back in June. At that time, the Virgin Galactic share price had jumped 50% in the previous month. The company was flying (quite literally), thanks to another successful test flight. The following month, the company successfully completed the first fully crewed spaceflight. 

There was also optimism regarding the commercial side of operations. The business has been loss-making in recent years due to the high research and development costs. For example, it lost $210m in 2019, followed by $273m in 2020. Yet as the company moved closer to being able to launch the service to paying customers, deposits were finally coming in the door. 

Given that a seat is currently being priced at $450,000, it won’t take many sales to start recouping the firm’s large spend. In the latest results for Q3, 700 of the first 1,000 seats had been reserved.

Reasons for the drop

Given that momentum regarding flights and revenue is picking up, the slump in the Virgin Galactic share price since the summer could be surprising. However, there are a few issues I put it down to.

First, the company is by no means the only one in this area. Blue Origin and SpaceX are other prominent players that are vying to take the top spot. In my opinion, SpaceX is leading the way, due to a link with NASA. Earlier this week, the company launched several NASA astronauts into space.

Second, I didn’t think the latest results were all that positive. Adjusted EBITDA for the quarter was a loss of $68m compared to $66m from the same quarter last year. Despite revenue coming through the door, expenses are still high (and higher than this time last year).

Finally, could it be that the market got over-excited back in the summer? The Virgin Galactic share price shot higher, at one point giving it a market cap around $14bn. For a company that was loss-making, this premium attached to the outlook was quite steep. 

Unsure about the Virgin Galactic share price

Investing in stocks that are making losses isn’t always a bad idea. For example, Tesla was making large losses before becoming profitable recently, but the share price was still heading higher during this period.

So I think it really comes down to what future value I assign to Virgin Galactic. If I believe that commercial space aviation is going to be profitable years down the line, then the fall in the Virgin Galactic share price could make it a bargain.

However, I think there are going to be further bumps in the road. Therefore, I’ll be steering clear of investing in it right now.

The post The Virgin Galactic share price has halved since July. Is it now a bargain? appeared first on The Twelfth Magpie.

But it seems not all investors share my enthusiasm as the stock has taken a nosedive this week. In fact, since Monday, the Virgin Galactic share price is down over 30%. While its 12-month performance is still up around 80%, the question remains – what’s causing this downward momentum? And is this a buying opportunity for my portfolio?

The crashing Virgin Galactic share price

The successful flight marks a massive milestone that the business has been working towards for 17 years. Yet despite this success, the stock is seeing an enormous level of selling pressure. And it’s actually quite understandable. Why? Because the company has since filed with the Securities Exchange Commission to sell up to $500m in common stock. It’s issuing new shares to raise additional capital for its next stage of commercial development. But, as a side effect, the Virgin Galactic share price is suffering from dilution.

Approximately 10.2 million shares are being offered. Comparing that to the existing 240 million shares outstanding indicates a dilution effect of around 5%. That’s certainly nowhere near as large as the 30% drop in price. But it’s worth noting that Virgin Galactic’s share count has increased by over 170% since 2018.

Given that the business remains pre-revenue, beyond the 600 pre-booked tickets sold, I don’t think the need to raise additional capital will disappear any time soon. In fact, I wouldn’t be surprised to see more shares issued in the future. Maybe that’s why selling pressure has been so high lately.

Time to buy?

Seeing a rise in the number of shares outstanding isn’t much fun for existing investors. But dilution effects are ultimately a short-term problem. Meanwhile, Virgin Galactic is receiving a significant surge of capital that can be reinvested in expanding its operations. The management team has forecast that the business will generate approximately $1bn of revenue a year per spaceport once in a commercial state. Assuming this target is reached, today’s $8bn valuation seems far more reasonable.

However, it could be several years before that becomes a reality. Meanwhile, other competing companies like Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX are fighting for the same niche market of customers who can afford a $250,000 ticket. I feel this is important to highlight because all it takes is one fatal accident for the reputation of any of these businesses to be severely tarnished. If such a tragedy were to occur, it wouldn’t be difficult for competitors to quickly snatch up market share.

All things considered, I believe the Virgin Galactic share price has the capability of exploding over the long term. Having said that, there remain a large number of unknowns at this stage. And with its valuation seemingly being primarily driven by speculation, I’m keeping this business on my watchlist for now.

The post What’s going on with the Virgin Galactic share price? appeared first on The Twelfth Magpie.

This flight, which counted Virgin founder Richard Branson as one of its passengers, has been in the works since 2004. Many analysts speculated the venture would never achieve this goal. 

However, after 17 years of work, the company has proved it can successfully take paying customers to the edge of space and bring them back safely. 

I think this shows the company’s now well on the way to full commercial operations. As such, I’ve been taking a closer look at Virgin Galactic stock to see if it could be worth adding the cutting-edge enterprise to my investment portfolio. 

Cutting edge technology

Unfortunately, while the company has proven its technology works, it still has to convince the world it can make this into a sustainable business. Now the technology’s sorted, this is the primary challenge the group has to overcome. 

The company has around 600 adventurers who have already paid deposits for tickets to fly into space. Costing up to $250,000 apiece, Virgin Galactic has been selling these tickets for years.

The group has slowed ticket sales while it finalised and refined its technology. But after last weekend’s successful flight, the company could start taking more bookings for wealthy customers soon.

One group of Wall Street analysts estimates the space tourism market could be worth $3bn a year by 2030. I think this shows the size of the potential market for the company. 

It’s planning further test flights this year before beginning regular commercial operations in 2022. 

To help fund the ramp-up to commercial operations, the firm recently announced it’s looking to raise up to $500m through the issue of new shares. This seems to be one of the reasons why Virgin Galactic stock has performed so poorly since the company’s initial passenger space flight. 

Virgin Galactic stock issue 

The new shares will reduce each existing investors’ claim on the business. Therefore, each outstanding share is technically worth less, diluting existing shareholders by around 6% (based on current market prices).

By comparison, over the past five days, Virgin Galactic stock has fallen nearly 19%. But over the past year, shares in the company have increased by around 105%. 

Based on these figures, it looks to me as if the market’s review of the business is far too pessimistic. As such, I think there could be an opportunity here. 

That said, there are plenty of risks on the horizon. Virgin Galactic isn’t the only company in the space tourism sector. It could face competition from competitors owned by Elon Musk and Jeff Bezos. 

Further, this is an experimental industry. Virgin Galactic already had to deal with a deadly accident in 2014. Another severe incident would almost certainly damage the group’s reputation. 

Despite these risks, I’m excited by the company’s potential. So, despite its speculative nature, I’d buy Virgin Galactic stock for my portfolio. 

The post Is now the time to buy Virgin Galactic stock? appeared first on The Twelfth Magpie.

The business potential

Virgin Galactic is a commercial space flight business. The goal is to create a brand-new market for space tourism. Individuals can spend $250,000 on a ticket to see our blue planet from above and experience zero gravity. But beyond this target, the company is also venturing into launching new Mach 3 aircraft to make international air travel far more efficient. Currently, a flight between Los Angeles and Tokyo takes around 12 hours. But with Virgin Galactic, that could be reduced to a third of that.

I can see why investors are excited by the prospect, especially since one of the firm’s chief competitors, Blue Origin, just sold its first ticket at auction for $28m! This is particularly important, since to date, Virgin Galactic has received around 8,000 flight reservations. Meanwhile, Blue Origin saw more than 7,600 participants in its ticket auction, the vast majority of whom were willing to pay up to $5m on a single ticket.

To me, that signals two things. Firstly, the space tourism market, while niche, may be much larger than initially anticipated. And secondly, Virgin Galactic’s seemingly expensive tickets might actually be incredibly cheap, relatively speaking. Is this the easyJet of the space travel industry? Regardless, it looks like finding customers won’t be a problem. And with an estimated $1bn of revenue expected to be generated per year from a single spaceport, the business looks like it could be about to take off.

The volatile Virgin Galactic share price

There are doubtless many contributing market forces responsible for the large swings in Virgin Galactic’s share price. However, whether I look at options traders, retail investors or short-sellers, there are two prominent themes – uncertainty and excitement.

In February 2021, the company announced its first commercial space flight would be delayed until 2022. This led to the stock plummeting. But then, following the successful flight test in May, it shot straight back up. And just last week, Virgin Galactic received regulatory approval from the FAA to take customers to space, launching the share price up by another 39% in one day. This level of volatility is hardly surprising, given that the stock seems to be entirely driven by speculation. After all, the firm has no existing revenues beyond advanced bookings that can potentially be refunded.

Needless to say, that exposes investors to a lot of risk. Suppose another delay occurs, or a catastrophic failure happens during product testing, or even worse, during a future commercial flight. These could have a considerable adverse impact on investor and consumer confidence, and consequently, the stock price.

The bottom line

In my opinion, Virgin Galactic has the potential to be a highly lucrative investment. But whether that will happen has yet to be seen. Given the level of uncertainty, this looks more like gambling than investing in my eyes, so I’m personally not interested. At least, not for now.

Once commercial flights begin and a clearer picture of the viability of this business begins to form, I may change my mind.

The post The Virgin Galactic share price is exploding! Should I buy now? appeared first on The Twelfth Magpie.